Australia Ratchets Up Spending in Drive for Maximum Employment

Australia unveiled a big-spending budget that aims to run the economy red hot, joining the U.S. and Europe with a fiscal-monetary tandem that seeks to drive unemployment down to levels rarely seen in the past 50 years, Bloomberg News reported. Treasurer Josh Frydenberg’s 2021-2022 fiscal blueprint aligns both economic orthodoxy with the political needs of a government facing an election in the next year. While the budget deficit in the 12 months through June 2022 is wider than expected at 5% of GDP, it leaves the opposition Labor party struggling for a narrative when the conservative incumbent is spending so freely. “By prioritizing economic repair over budget repair, the federal government has made the correct choice,” said Callam Pickering, an economist at global jobs website Indeed Inc. who previously worked at the central bank. “For a decade we’ve had successive federal governments undermine Australia’s economy through inadequate fiscal policy.” Frydenberg is joining international peers such as U.S. Treasury Secretary Janet Yellen in a spending bonanza designed to drive the economy to maximum employment. His program is being buttressed by the Reserve Bank of Australia’s record-low interest rates, yield target and bond-buying program that aim to break a prolonged run of weak inflation. The government is spending heavily on infrastructure, aged care and tax breaks for households and businesses. But it has given itself some wriggle room for later upgrades to the budget position by taking very conservative iron ore and jobless rate forecasts. Read more.